Entertainment

Since Twitter Won’t Sell, Who Should Facebook Buy?

The hot rumor today is that Facebook and Twitter held “several weeks of serious talks” about an acquisition recently, which have since come to an end after the two were unable to reach an agreeable price for the microblogging service. Alas, there are greater tragedies.

While Twitter might be the “it” startup of 2008, it somewhat famously has zero revenue. Meanwhile, although Facebook has become the most trafficked social network, its biggest competitor, MySpace, does a far better job of monetizing its users as it evolves into an online media company. What can Facebook do to counter? Instead of buying the hottest startup on the planet, take a look at acquiring companies with real business models that are in need of what Facebook has – hundreds of millions of users. Here are a few ideas that come to mind:

SmugMug

We know that Facebook isn’t just the world’s biggest social network, it’s also its biggest photo sharing site. SmugMug offers a gorgeous interface for organizing photos, but more importantly, offers serious monetization by letting users buy prints, postcards, merchandise, and more. MySpace recently introduced its own options for photo printing, through a partnership with HP.

Imeem (or iLike)

Increasingly, Facebook’s lack of a music service is becoming one of its most glaring omissions. Recently, rumors surfaced that the company was looking to forge a partnership or outright purchase one of the online music companies. iLike already owns the most popular music application on Facebook, while Imeem offers a more popular destination site and widget network. The business model here is obvious: digital downloads, concert tickets, merchandise, and ringtones. Their big competitor: MySpace Music.

Jaxtr

This startup provides web-based VoIP services, allowing users to create widgets that can be embedded on blogs, websites, and social networking profiles. While all seemed to be rosy as the company passed 10 million users and introduced premium services to make money, Jaxtr recently laid off staff and saw its CEO resign.

What’s the play for Facebook? Like other web-based VoIP services, while member-to-member calling is free, calling out to landlines or cell phones costs money. Since Facebook would be spending $0 on user acquisition (typically a huge cost for VoIP services), that revenue drops right to the bottom line.

An Ad Network

For a while, speculation had it that Facebook would launch its own behavioral ad network, where users' profile data would be leveraged to serve ads on participating publishers' sites. Ultimately, we wound up with Beacon, which just freaked people out and ruined a few people's Christmas. Nonetheless, this remains a huge opportunity for Facebook, and with an unsustainable number of ad networks out there as we head into an economic slowdown, Facebook could pick up a big network (in terms of reach and impressions) on the cheap, and then insert its own behavioral technology behind the scenes.

Digg

Acquiring Digg would be a bit out of leftfield and probably very unlikely; whereas the other names on this list are services that would integrate within Facebook, Digg is its own massive destination site. However, the two companies are already working together to bring Facebook Connect to Digg. News is the cornerstone of any media operation, and Digg, with Facebook Connect, would simply fit the bill without being a boring also-ran in the world of news aggregators.

Plus, with Google no longer interested, Yahoo building its own social news site (Buzz), and the big media companies all being squeezed by the current economy, there aren’t that many companies that would offer a competing bid. On the other hand, Facebook could potentially build their own Digg competitor, based on an aggregate view of user’s posted items.

Will Any of These Deals Actually Happen?

The Pros: all of the businesses above offer Facebook logical ways to make money. The Cons: None of the above are nearly as sexy as Twitter, and they all come with baggage.

Nonetheless, even if Facebook isn’t worth the $15 billion valuation they used to try and persuade Twitter to do a deal, they are in a far better position than most as the economy slows down. Lots of startups with good ideas and good business models simply won’t be able to gain users fast enough to survive. Facebook can scoop up these types of companies on the cheap, get them integrated, and emerge from the current economic downturn as an online media company with diverse revenue streams. On the other hand, the alternative - not doing any deals - isn't a bad idea either.

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